The last 24 hours of news reporting of BP’s oil spill in the UK has shifted from the devastation being wrought on the Gulf of Mexico into one where politicians and businessmen are lambasting President Obama for his “anti-British” rhetoric.
A British backlash has begun.
True this morning the BBC leads with the news that new calculations put the spill rate at double previous estimates.
As much as 40,000 barrels (1.7m gallons) of oil a day may have been gushing out from a blown-out Gulf of Mexico well,
This means the amount of oil pouring into the Gulf is equivalent to an Exxon Valdez disaster every eight to ten days.
That is a huge amount of oil and it means that BP deliberately lied from day one about the size of this spill. That is a huge crime.
But investors seem more worried about the political rhetoric emanating from the US rather than the reality on the ground in the Gulf.
“BP has many problems in the U.S.,” Justin Urquhart Stewart, co-founder of Seven Investment Management in London, said. “One of them is that it has the word British in its title.”
Iain Armstrong, an analyst at investment manager Brewin Dolphin in London said “It’s gotten completely out of hand. It’s a totally overpoliticized situation. There is a disconnect between reality and BP being totally lambasted.”
John Napier, chairman of Royal & SunAlliance, the UK insurer, has even written in a personal capacity to President Obama to accuse him of possible “double standards” in his “somewhat prejudicial and personal” criticisms of BP and its chief executive. “There is a sense here that these attacks are being made because BP is British,” Mr Napier wrote.
As I blogged yesterday, Boris Johnson, the Mayor of London, added “I do think there’s something slightly worrying about the anti-British rhetoric that seems to be permeating from America”.
But the press and politicians have missed the real story and one that does threaten BP and Britain’s pensions funds that invest in the company.
Yesterday the International Energy Agency, admitted in its Oil Market Report that BP’s spill is a potential “game changer” for oil supply, which could restrict future subsea oil development and limit supply.
“April’s sinking of the Deepwater Horizon drilling rig and the ongoing oil spill might … prove to be a supply-side game changer,” the IEA said in its monthly Oil Market Report.
“Costs are going to go up, projects are going to be delayed and some sort of regulatory overhaul is likely in the United States in the aftermath of this terrible accident,” David Fyfe, head of the IEA’s oil industry and markets division, told Reuters. He added that the spill had “the potential to change the dynamic on the supply side of the equation” in the oil market.
Changing the deep-offshore dynamic could impact BP’s long-term viability much more than the huge financial fallout from the spill.
For BP the deep off-shore is one of the key places the company has left to look for oil. And if this becomes much more expensive or is ruled politically unacceptable it will severely impact the company.
Fyfe continued: “As international companies are pushed to try to develop new resources in more and more remote and more technologically challenging areas, there is increasing risk and increasing cost”.
It is these risks that the investors need to understand. Some in the city have looked and they do not like what they see. Richard Ward, the chief executive of Lloyd’s wrote earlier this week that: “If the slick in the Gulf is the first indicator of the potential economic chaos we face as demand pushes us into ever riskier places, then securing our energy supply means investing in clean and renewable energy technology.”
And that would be a game changer.